D08540000120114013Session 15 and 16_Layout Design

7/28/2019 D08540000120114013Session 15 and 16_Layout Design

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Session 13

Review 1

.

D 0 8 5 4Supply Chain : Manufacturing and Warehousing


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Review 1 : Session 1 until 6

Bina Nusantara University

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Session 1 :

The Role of Operations Management and its connection to

corporate strategy


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Manufacturing Matters

A question that is being debated and has been debated

by economist for the past 20 years is

the importance of a strong manufacturing base.

Precisely, the shift in jobs from the manufacturing sector

to service sector.

Is a strong manufacturing based important for the health

of company ?


4Source : Production and Operations Analysis 4th

Edition, Steven NahmiasMcGraw Hill International Edition


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A Framework for Operations Strategy ( Porter, 1990 ) indicated the two dimensions of

a. Lower Cost

b. Product Differentiation

Reference is the classical literature on competitiveness

claims that firms position themselves strategically in the

marketplace along one of the mentioned twodimensions.





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Session 2 :

The Role of Operations Management and its connection to

corporate strategy


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Classical View of Operations StrategyThe traditional view treats most strategic issues in the

context of a single plant rather than the entire firm.

The broad issues in A Framework for Operations Strategy

relate to operations strategy on the firm level.

The classical view of Operations Strategy relates to the

following issues :

Time Horizon

Focus

Evaluation

Consistency





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Competing in a Global Marketplace International competitiveness has become a nationalobsession. Each country is trying to enhance their

standard of living is eroding while it seems to improve

elsewhere.

In his excellence study of international competitiveness,Porter ( 1990) poses the following questions :

Why does one country become the home base for

successful international competitors in an industry ?





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Session 3 :

Economic Order Quantity and its variation


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INVENTORY CONTROL SYSTEMS

The fundamental inventory problem can be succinctly

described by two questions :

1. When should an order be placed ?

2. How much should be ordered ?

The complexity of the resulting model depends upon the

assumptions one makes about the various parameters

of the system.

The major distinction is between

a. Inventory Control Subject to Known Demand

b. Inventory Control Subject to Unknown Demand





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Econom ic Order Quant i ty and i ts var iat ion

The EOQ Model ( Economic Order Quantity Model )

is the simplest and most fundamental of all inventory

models.

It describes the most important trade-off between

Fixed Order Costs and Holding Costs.

And is the basis for the analysis of more complex systems.





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Order Quantity

Annual Cost

Order (Setup) Cost Curve

Optimal

Order Quantity (Q*)Bina Nusantara University

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The Economic Order Quantity Model

Assumptions:

1. Product ion is instantaneous.There is no capacityconstraint and the entire lot is produced simultaneously.

2. Delivery is imm ediate.There is no time lag betweenproduction and availability to satisfy demand.

3. Demand is determ inist ic.There is no uncertainty aboutthe quantity or timing of demand.

4. Demand is con stant over t ime.In fact, it can berepresented as a straight line, so that if annual demand is365units this translates into a daily demand of one unit.

5A product ion run incurs a constant setup cost.Regardless of the size of the lot or the status of the factory,the setup cost is the same.

6. Products can be analyzed sing ly.Either there is only asingle product or conditions exist that ensure reparability ofproducts.


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Notation

D= Demand rate (in units per year).

c= Unit production cost, not counting setup or inventory

costs (in dollars per unit).

A = Constant setup (ordering) cost to produce

(purchase) a lot (in dollars).

h= Holding cost

Q= Lot size (in units); this is the decision variable


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Session 4 :

The newsvendor model and its applications.


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Newsvendor model implementation steps

Gather economic inputs: selling price,

production/procurement cost,

salvage value of inventory

Generate a demand model to represent demand

Use empirical demand distribution

Choose a standard distribution function

the normal distribution,

the Poisson distribution.

Choose an objective: maximize expected profit

satisfy a fill rate constraint.

Choose a quantity to order.


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Session 5 :

Probabilistic inventory models, service levels and safety

stocks


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A Probabilistic Inventory Model.Assumptions:

Probabilistic lead-time demand(DL)

mean DL standard deviation DL probability distribution fcn.P(DL) / density fcn.f(DL)

cumulative distribution fcn.F(DL)

=P(lead-time demand

Continuous review (Q,R) system ( (s, Q) system)

fixed order size Q

order pointR (ors), i.e., variable order period

Demand during stock-out periods is backlogged

LD


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Determination of the order point R?3 alternative models:

1. Specified probability of no stockout during lead time

service level:

2. Specified proportion of demand satisfied from inventory

on hand

Pservice level:

3. Cost minimization

csshortage cost

RFRDPL

P

E

E

demand

shortunitsof#1


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Reorder

Point , R

X

Safety Stock (SS)

Time

Inventory Level

Optimal

OrderQuantity

SS

s

Expected

Demand P(Stockout)Freq

Lead Time

Place

orderReceive

order

Probabilistic Models

When to Order


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Session 6 :

Probabilistic inventory models, service levels and safety

stocks


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Service Levels in (Q,R) Systems

In many circumstances, the penalty cost,p, is difficult to estimate.

For this reason, it is common business practice to set inventorylevels to meet a specified service objective instead.

1) Type 1 service: Choose Rso that the probability of not stocking outin the lead time is equal to a specified value.

Appropriate when a shortage occurrence has the same consequenceindependentof its time and amount.

2) Type 2 service: Choose both Q and Rso that the proportion of

demands satisfied from stock equals a specified value. In general, is interpreted as the f i l l rate.


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Solution to (Q,R) Systems

with Type 1 Service Constraint

F(R) probability demand is satisfied

Set Q EOQ 2K

h

For type 1 service, if the desired service level

is then one finds R from F(R)= and

Q=EOQ

Specify , which is the proportion of cycles in

which no stockouts occur.

This is equal to the probability that demand

is satisfied.


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Solution to (Q,R) Systems

with Type 2 Service Constraint

Type 2 service requires a complex iterative solution procedure to

find the best Q and R

However, setting Q=EOQ and finding R to satisfy n(R) = (1-)Q(which requires Table A-4) will generally give good results

Average Stockouts per Cycle

Average Demand per Cyclen(R)

Tn(R)

Q

n(R)

Q 1 ,

n(R) 1 Q


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Why Safety Stock?

Safety Stoc k:Average level of the net stock just before areplenishment arrives

Pressu re for higher safety s tock s

Increased product variety and customization

Increased demand uncertainty

Increased pressure for product availability

Pressu re for lower safety s tock s

Short product life cycles


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The ABC Inventory Classification System

The ABC classification, devised at General Electric during the 1950s, helps a

company identify a small percentage of its items that account for a large

percentage of the dollar value of annual sales. These items are called Type A

items. Adaptation ofParetos Law

20% of the people have 80% of the wealth (in 1897 Italy)

Since most of our inventory investment is in Type A items, high

service levels will result in huge investments in safety stocks.

Tight management control of ordering procedures is essential for

Type A items.


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Review 2 : Session 7 until 12


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Session 7 :

Production flows for discrete-part manufacturing and their

documentation.


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Production Flow and Discrete Manufacturing

Business Process Flow

Create planned independent requirements

Run MRP at plant level

Purchase (convert purchase requisition to purchase order, then post goods receipt)

Release production orders for sub-assembly production

Confirm and withdraw raw material

Create production order for final assembly

Assign batch number in production order

Check capacity for the final assembly

Option1:If final assembly is done internally

Release assembly orders

Pick Components

Confrim assebly activities


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Production Flow and Discrete Manufacturing

Option 2:

If final assembly is done externallyCreate subcontracting purchase order (external process)

Transfer stock to subcontractor storage

Release Assembly Orders

Post goods receipt for subcontracting order

Complete the production order for final assembly technically


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Session 8:

Make-or-Buy Decisions and Capacity planning


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Definitions Make-or-Buy decisions compare the cost of

producing a component or providing the serviceinternally with the cost of purchasing the componentor service from an external supplier Probert (1995),identifies 3 levels of a make-buy decision:-

Strategic affects the shape & capabilities of theorganisation

Tactical deals with issues of temporary imbalancesof capacity

Component decisions usually made at the designstage


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Outsourcing Outsourcing:-

possibly a wider term than make-buy and the two terms can beused synonymously, but is the strategic use of resources toperform activities traditionally handled by internal staff & theirresources (it is a) management strategy by which an

organisation outsources major non-core functions tospecialised, efficient service providers

Source: Outsourcing Institute on http://www.outsourcing.com


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Subcontracting

may be distinguished from outsourcing in that the latter

involves the total restructuring of an enterprise around core

competences and outside relationships. Whatever the degree

of outsourcing enterprises must retain certain core capabilities.

Outsourcing is a strategic long term decision, Subcontracting

is a tactical, short term approach.

Source: Lysons & Gillingham (2003)


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Levels of decision making

Operational Strategies are concerned with: -short term

decisions

The integration of resources, processes, people and

skills

The implementation of corporate strategies


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Session 9 :

Aggregate Planning


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Aggregate Planning

Aggregate planning, which might also be called

Macro Production Planning,

address the problem of deciding :

how many employees the firm should retain,

and for a manufacturing firm,

The quantity and the mix of products to be

produced.

Macro production planning is not limited tomanufacturing firms.

Macro production planning strategies are a fundamental

part of the firmss overall business strategy.


37Source : Production and Operations Analysis 4th Edition, Steven Nahmias

McGraw Hill International Edition


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Aggregate Planning

The methodology of aggregate planning in this topic

requires the assumption that

Demand is deterministic , or known in advance.

This assumption is made to simplify the analysis and

allow us to focus on the systematic or predictable

changes in the demand pattern, rather than on the

unsystematic or random changes.

The goal of the analysis is to determine the number of

workers that should be employed each period and thenumber of aggregate units that should be produced each

period.

Bina Nusantara University 38Source : Production and Operations Analysis 4th Edition, Steven NahmiasMcGraw Hill International Edition


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Aggregate Planning

The objective is to minimize costs of production, payroll,

holding and changing size of the workforce. The cost of

making changes are generally referred to as smoothing

costs.

Most of the aggregate planning models discuss in this

topic assume that all costs are linear functions.

This means that the cost of hiring an additional worker is

the same as the cost of hiring the previous worker,

and

the cost of holding and additional unit of inventory is the

same as the cost of holding the previous unit of

inventory.Bina Nusantara University 39Source : Production and Operations Analysis 4th Edition, Steven Nahmias

McGraw Hill International Edition


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Hierarchy of

Production DecisionsLong-range Capacity Planning


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Planning Horizon

Aggregate planning: Intermediate-range capacityplanning, usually covering 2 to 12 months.

Shortrange

Intermediate

range

Long range

Now 2 months 1 Year


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Aggregate Planning Strategies Should inventories be used to absorb changes in demand duringplanning period?

Should demand changes be accommodated by varying the size ofthe workforce?

Should part-timers be used, or should overtime and/or machine idletime be used to absorb fluctuations?

Should subcontractors be used on fluctuating orders so a stableworkforce can be maintained?

Should prices or other factors be changed to influence demand?


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Why Aggregate Planning Is Necessary Fully load facilities and minimize overloading andunderloading

Make sure enough capacity available to satisfy expected

demand

Plan for the orderly and systematic change of production

capacity to meet the peaks and valleys of expected

customer demand

Get the most output for the amount of resources

available


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Session 10 :

MRP explosion for multi-stage production systems

Bina Nusantara University 44


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Resource Requirements Planning

Master Production

Scheduling (MPS)

Material RequirementsPlanning (MRP)

Capacity Requirements

Planning (CRP)

Aggregate

Planning

Resource

Requirements

Planning

Adapted from Operations Management by Gaither & Frazier

South-Western


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Material Requirements Planning (MRP)


South-Western


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Materials Requirements Planning (MRP)

Computer based system

Explodes Master Schedule (MPS) into required amounts

of raw materials and subassemblies to support MPS

Nets against current orders and inventories to develop

production and purchased material ordering schedules


South-Western


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Objectives of MRP

Improve customer service

Reduce inventory investment

Improve plant operating efficiency


South-Western


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Order Changes

Order

Planning

Report

Elements of MRP

MRP

System

Planned OrderSchedule

InventoryTransaction Data

Bill ofMaterials File

MasterProductionSchedule

InventoryStatus File

Service-PartsOrders andForecasts

PerformanceException

Reports

Inputs Outputs


South-Western


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Session 11 :

Lot sizing, shop floor scheduling



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Lot Sizing, Shop Floor Schedule

Lot Sizing & Lean Manufacturing Strategy

Why Small Lots?

Small lot production (ideally one piece) is animportant component of many Lean Manufacturing

strategies. Lot size directly affects inventory and

scheduling. Other effects are less obvious but equally

important. Small lots reduce variability in the system

and smooth production. Small lots also enhancequality in many ways.



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The Lean Manufacturing literature gives little

guidance on lot sizing other than statements such as:

"the lot size should be one" or "lot sizing is irrelevant."

This series of papers examines the lot sizing problem in

Lean Manufacturing. It offers a rational alternative tothe slogans and edicts.

The effects of small lots differ somewhat between Make

To Order (MTO) and Make To Stock (MTS)

environments but they are important in either situation.


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In MTO environments, the ability to make smaller lots economicallymakes it practical to accept smaller orders. This can open newmarket segments or eliminate middlemen from the logisticschain.

One of our former clients restructured the entire vinyl siding

industry when they achieved reliable delivery of small lots directlyto retail outlets.

In an MTS environment, small lots translate directly to smallerinventories. Inventory carrying costs are significant and arediscussed further below. In fast-changing fashion or technologymarkets, obsolete inventory may make the difference between profit

and loss. Smaller lots often enable conversion from MTS to MTO. Many factories that deliver to their customers in MTO operate

intermediate processes in MTS. The MTS discussion applies tothose intermediate and upstream operations.


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Scheduling via Lot Sizing

Case: TJ International Parallam Product

Issues:Press is bottleneck

12 hour changeover time to switch widths (12, 14, 16, 19)

Many products made from each width, but less 14/16 than

16/19Currently try to run at least a week between changeovers

Seasonal demand: inventory build up in off-season

Problem: determine run sequence each month

Lathe/Clip Press Saw


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Scheduling via Lot Sizing

Notation:

Problem: choose lot sizes for the month to meetdemand as efficiently as possible.

variable)(decisionproductfor(parts)sizelot

productfor(hr)timesetup

productof(parts/hr)rateproduction

productfor(parts/hr)demandhourly

productforth)(parts/mondemandmonthly

nutilizatiodesired

hours/daydays/monthavailablehours

ix

is

ip

id

iD

u

H

i

i

i

i

i


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Session 12 :

Pull systems and the Just-in-Time Philosophy



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Pull systems and the Just-in-Time Philosophy



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Push and Pull Control System

Push System

Once production is completed in one stage, produced units are pushed to the next stage.

Pull System

Only when production is requested by the next stage, production is started in the stage.

1 32


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MRP (Materials Requirements Planning)

MRP is the basic process of translating a production schedule for an end product (MPS

or Master Production Schedule) to a set of requirements for all of the subassemblies

and parts needed to make that item.

MRP is the classicpush system. The MRP system computes production schedules forall levels based on forecasts of sales of end items. Once produced, subassemblies are

pushedto next level whether needed or not.

JIT (Just-In-Time)

Derived from the original Japanese Kanban system developed at Toyota. JIT seeks to

deliver the right amount of product at the right time. The goal is to reduce WIP (work-in-process) inventories to an absolute minimum.

JIT is the classicpullsystem. The basic mechanism is that production at one level only

happens when initiated by a request at the higher level. That is, units arepulledthrough

the system by request.



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MRP (Materials Requirements Planning)

Terminologies

Master Production Schedule (MPS) : Planned production quantities by

time period out into the future for every end item.

Bill of Materials (BOM) : A bill of materials for a particular inventory

items (parent) shows all of its immediate components and their numbersper unit of the parent.

Level Coding : To provide a systematic framework for exploding back

the implications on all components of a given schedule for final assembly

operations.

Lead Times (Offsetting) : The time that elapses from when the purchaseorder is issued until the moment when the material is physically present

ready for the operation.



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Information Required for MRP Implementation

Master Production Schedule out to the planning horizon

Inventory status of each item including possible backorders

Timing of and quantities involved in any outstanding or planned

replenishment orders

Forecasts (which can be partially or entirely firm customer

orders) of demand for each component, subject to direct customer

demand, by time period out to the planning horizon

All relevant bills of materials and associated level codes

Production or procurement lead times (offsets) for each operation

Possible scrap allowances for some operations



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Explosion Calculus

The explosion calculus is a set of rules for converting the master

production schedule to a requirements schedule for allsubassemblies, components, and raw materials necessary to

produce the end item.

There are two basic operations comprising the explosion

calculus.

Time phasing : requirements for lower level items must beshifted backwards by the lead time required to produce the items

Multiplication : a multiplicative factor must be applied when

more than one subassembly is required for each higher level item.


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D08540000120114013Session 15 and 16_Layout Design